Choose your savings vehicles

Which saving vehicle to choose? You're sure to get an answer with the help of your financial planner. However, it is always a good idea to know the various savings vehicles available.

Whether you invest in registered securities, equities or real estate, you are putting money away. And when it comes time to invest, the important thing is not to put all your eggs in one basket.

Registered investments

Registered retirement savings plans (RRSPs) are registered with the Canada Revenue Agency. They give you a tax-sheltered way to save capital for retirement. But watch out: sums withdrawn from an RRSP are taxable. This makes RRSPs a great retirement savings vehicle because it is less tempting to withdraw amounts and thereby boost your taxable income.

RRSPs are particularly appealing for young savers since they can use the accumulated capital to buy a home.

Many types of investments can be held in an RRSP, from listed shares of a publicly traded company to debt securities. Whatever investment you choose, be sure to respect your investor profile.

A tax-free savings account (TFSA) is also registered with the Canada Revenue Agency. You can contribute a maximum of 5 500 $ a year to a TFSA. Contributions are not tax-deductible. However, any investment returns or income are tax-free, even if amounts are withdrawn from the account.

In general, you can hold the same types of investments in a TFSA as you can in an RRSP. These include mutual funds, listed securities, guaranteed investment certificates (GICs), bonds and certain shares of small business corporations.

Voluntary retirement savings plans (VRSPs) are also registered with the Canada Revenue Agency. They are similar to RRSPs in that:

contributions to a VRSP are deductible from taxable income

contributions can be deducted at source from income paid by your employer

accumulated amounts are not taxable as long as they are not withdrawn.

VRSPs are a simple solution. They offer a default investment option as well as a limited number of other investment options to meet everyone's needs.

Unregistered investments

The list of unregistered investments is very long because any investment can be considered an unregistered investment (real estate investments, for example). There are four types of registered investments: